Oshkosh Corporation Reports Fiscal 2012 Second Quarter Results
Oshkosh Truck (NYSE:OSK)
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Today : Thursday 26 April 2012
Oshkosh Corporation (NYSE: OSK) today reported fiscal 2012 second quarter net income attributable to Oshkosh Corporation of $37.3 million, or $0.41 per diluted share, compared to $67.9 million, or $0.74 per diluted share, in the second quarter of fiscal 2011. Results for the second quarter of fiscal 2012 included after-tax charges of $0.02 per diluted share related to the proxy contest in connection with the Company’s 2012 annual shareholders’ meeting and $0.02 per diluted share related to the Company’s exit from its U.S. mobile medical trailer product line and workforce reductions at Pierce.
Consolidated net sales in the second quarter of fiscal 2012 were $2.08 billion, an increase of 18.9 percent compared to the prior year second quarter. Increased replacement driven demand for aerial work platforms and telehandlers in the access equipment segment and higher defense segment Family of Medium Tactical Vehicles (FMTV) sales were offset in part by the expected decline in sales of Family of Heavy Tactical Vehicles (FHTV) and aftermarket parts, also in the defense segment.
Consolidated operating income in the second quarter of fiscal 2012 was $75.9 million, or 3.7 percent of sales, compared to $132.4 million, or 7.6 percent of sales, in the prior year second quarter. Increased earnings on higher access equipment segment sales were more than offset by lower defense segment earnings that resulted from an adverse product mix.
“Strong performance by our access equipment segment drove quarterly results above our expectations," said Charles L. Szews, Oshkosh Corporation president and chief executive officer. “We believe customer actions and industry metrics point to a sustained recovery in global access equipment markets. Our success in responding to this recovery enables us to raise our performance outlook for the full fiscal year 2012.”
“We expect the execution of our MOVE strategy in fiscal 2012 will lead to a strong improvement in our Company’s earnings in fiscal 2013. During the second quarter, we continued to take steps toward optimizing the cost structures of our businesses. In our fire & emergency segment, we exited the U.S. mobile medical trailer product line, restructured our workforce at Pierce and made solid progress integrating multiple product lines in our Florida operations. In our commercial segment, we reconfigured our refuse collection vehicle production lines to improve production efficiencies and closed a fabrication facility. In the defense segment, we continued to reduce our costs on the FMTV contract. And, we launched innovative new products like our Rental Series scissor lifts to address cost conscious segments of the access equipment market,” said Szews.
Factors affecting second quarter results for the Company’s business segments included:
Access Equipment – Access equipment segment sales increased 61.4 percent to $760.4 million for the second quarter of fiscal 2012 compared to the prior year second quarter principally as a result of higher unit volumes and the realization of previously announced price increases. Sales grew by double-digit percentages compared to the prior year quarter in all major regions of the globe, with the largest increase in North America driven largely by replacement of aged equipment.
In the second quarter of fiscal 2012, access equipment segment operating income increased 285.3 percent to $68.4 million, or 9.0 percent of sales, compared to prior year second quarter operating income of $17.7 million, or 3.8 percent of sales. The increase in operating results reflected higher volume, the realization of previously announced price increases, improved product mix and improved absorption related to higher sales volume, offset in part by higher raw material costs and higher new product development spending.
Defense – Defense segment sales increased 1.5 percent to $987.3 million for the second quarter of fiscal 2012 compared with the prior year second quarter. The increase was primarily due to higher FMTV unit sales, offset by lower FHTV unit sales and lower aftermarket parts sales.
In the second quarter of fiscal 2012, defense segment operating income decreased 70.4 percent to $41.9 million, or 4.2 percent of sales, compared to prior year second quarter operating income of $141.6 million, or 14.6 percent of sales. The decrease in operating income was largely due to adverse changes in the product mix. Benefits from revenue and cost estimate changes of $15.2 million recognized in the second quarter of fiscal 2011 on undefinitized MRAP All-Terrain Vehicle (M-ATV) change orders also negatively impacted comparisons to the prior year period. The Company recorded higher profit margins on the FMTV program during the second quarter compared to the first quarter of fiscal 2012, although the profit margins remained in the low single digits.
Fire & Emergency – Fire & emergency segment sales for the second quarter of fiscal 2012 increased 2.4 percent from the prior year quarter to $181.5 million. The increase in sales primarily reflected increased intersegment production for the defense segment.
The fire & emergency segment reported an operating loss of $11.3 million, or 6.2 percent of sales, for the second quarter of fiscal 2012 compared to an operating loss of $6.6 million, or 3.7 percent of sales, in the prior year quarter. Operating results for the second quarter of fiscal 2012 included charges and severance costs totaling $2.4 million related to exiting the U.S. mobile medical trailer product line and workforce reductions at Pierce, as well as $2.6 million of litigation and environmental remediation charges. Operating results during the second quarter of fiscal 2012 continued to be negatively impacted by inefficiencies related to the transition of ambulance production to the Company’s facilities in Florida following factory consolidations in fiscal 2011.
Commercial – Commercial segment sales increased 10.6 percent to $167.7 million in the second quarter of fiscal 2012 compared to the prior year quarter. The increase in sales was primarily attributable to increased demand for aftermarket parts & service, increased concrete placement vehicle demand over very low prior year volumes and higher refuse collection vehicle demand, offset in part by lower intersegment production for the defense segment.
The commercial segment reported operating income of $3.9 million, or 2.3 percent of sales, for the second quarter of fiscal 2012 compared to $5.3 million, or 3.5 percent of sales, in the prior year quarter. The decrease in operating income primarily resulted from weaker overhead absorption on lower production volumes and higher personnel costs largely due to the elimination of employee furloughs, offset in part by earnings on the higher sales volume.
Corporate – Corporate operating expenses increased $1.5 million to $27.0 million for the second quarter of fiscal 2012 compared to the prior year quarter. Corporate operating expenses in the second quarter of fiscal 2012 included $3.6 million of costs related to the proxy contest in connection with the Company’s 2012 annual shareholders’ meeting.
Interest Expense Net of Interest Income – Interest expense net of interest income decreased $3.1 million to $17.6 million in the second quarter of fiscal 2012 compared to the prior year quarter. The decrease was largely due to the expiration of the Company’s interest rate swap in December 2011. Second quarter fiscal 2011 interest expense included $3.0 million of expense related to the Company’s interest rate swap. The Company repaid $32.5 million of debt during the second quarter of fiscal 2012.
Provision for Income Taxes – The Company recorded income tax expense of $21.6 million in the second quarter of fiscal 2012, or 36.2 percent of pre-tax income, compared to 39.5 percent of pre-tax income in the prior year quarter. The second quarter fiscal 2011 effective tax rate was negatively impacted by the effect of unbenefitted losses in foreign tax jurisdictions.
Six-month Results
The Company reported net sales for the first six months of fiscal 2012 of $3.95 billion and net income attributable to Oshkosh Corporation of $76.2 million, or $0.83 per share. This compares with net sales of $3.45 billion and net income attributable to Oshkosh Corporation of $167.5 million, or $1.83 per share, in the first six months of the prior year. The decrease in net income attributable to Oshkosh Corporation was primarily attributable to changes in the defense segment where an adverse product mix negatively impacted operating income comparisons, offset in part by improved access equipment segment results.
Updated Fiscal 2012 Expectations
The Company is increasing its outlook for fiscal 2012 primarily due to stronger than expected orders and sales in the access equipment segment in the second quarter of fiscal 2012. The Company now expects sales in the access equipment segment will be 35 percent to 40 percent higher in fiscal 2012 compared to fiscal 2011 with operating income margins of 7.5 percent to 8.0 percent in the segment. In addition, the Company has reduced expectations for the fire & emergency segment’s operating income to approximately breakeven as a result of second quarter results in this segment. The Company will discuss these changes and other changes to the Company’s fiscal 2012 outlook during a conference call later today.
Conference Call
The Company will comment on second quarter earnings during a conference call at 9:00 a.m. EDT this morning. Slides for the call will be available on the Company’s website beginning at 7:00 a.m. EDT this morning. The call will be webcast simultaneously over the Internet. To access the webcast, listeners can go to www.oshkoshcorporation.com at least 15 minutes prior to the event and follow instructions for listening to the broadcast. An audio replay of the call and related question and answer session will be available for 12 months at this website.
